12.12) Hard Bodies is a new entrant to the local health club scene. The owners o
ID: 1232051 • Letter: 1
Question
12.12) Hard Bodies is a new entrant to the local health club scene. The owners of Hard Bodies realize that profit can be increased through price discrimination. Accordingly, the firm employs several different pricing schemes. For each of the following explain whether it is price discrimination and, if so, what degree of price discrimination it is.a)- An annual membership to the club sells at a 50 percent discount of the total rate charged customers who choose to pay on a month-by-month basis (for example, the annual fee is $300 while the regular monthly rate is $50).
b)- Obese customers weighing at least 300 pounds get a 20% discount on all regular rates
c)- Spouses of members belonging to tge club qualify for a 30 percent discount on all regular rates.
d)- Hard bodies offers to beat ( through a 20 percent discount) any rate that a coustomer is offered by a rival health club.
Explanation / Answer
Price discrimination or price differentiation exists when sales of identical goods or services are transacted at different prices from the same provider. a)- An annual membership to the club sells at a 50 percent discount of the total rate charged customers who choose to pay on a month-by-month basis (for example, the annual fee is $300 while the regular monthly rate is $50). this is second degree price discrimination as price varies according to quantity sold. for annual membership less price is charged compared to second b)- Obese customers weighing at least 300 pounds get a 20% discount on all regular rates this is third degree price discrimination, price varies by attributes such as location or by customer segment, or in the most extreme case, by the individual customer's identity; where the attribute in question is used as a proxy for ability/willingness to pay. c)- Spouses of members belonging to tge club qualify for a 30 percent discount on all regular rates. this is third degree price discrimination, price varies by attributes like by the individual customer's identity d)- Hard bodies offers to beat ( through a 20 percent discount) any rate that a customer is offered by a rival health club. this according to me is not price discrimination as it does not insist on charging different prices from different individuals thnku ...
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